Business Acumen - Cultivating

Building a keen sense of business acumen doesn't come in a day. It requires tremendous observational skills. It needs you to commit time and efforts into the purpose. Keeping yourself updated is the key to being ready and strategically prepared. Successful professionals hone their Business Acumen skills by talking to other managers in key business positions, attending business seminars, and industry meetings. They always stay proactive and look forward to actively contributing to a plan.

The most important factors for any company to aim for growth are understanding the demands of the current market, the supply channels, and the economic conditions. Other factors include Business Statistics, Demographics like population of a place, buying trends, cost of manufacturing, sales and other logistics.

Critical Thinking to Build Business Acumen

There are times when you have to look at yourself hard in the mirror and ask yourself a few questions on your performance. Big organizations understand the importance of employing people who not only try to give their best effort, but also self-reflect when they don’t get the desired results.

The following activity helps to build and enhance Critical Thinking of the employees in a company. To complete all the steps, you need access to your company's financial statements.

For the rest of the details, you could use the following references −

Cash

As we now know, cash is the fuel on which the entire business machinery runs. Before understanding what changes can be brought in which fields, you must have a clear idea on how the numbers have stood from the past few years till now. The following table will help you gather a lot of necessary information in that regard.

Fill up this table with the data needed −

(The “Details needed” column will tell you the source of the information)

Based on the information collected above, answer the following questions −

• From the cash perspective, does your company maintain large amounts of cash on records? How does it deal with projects that involve lesser cash?

• How fast does your company utilize its cash to provide the products in demand to its suppliers and customers? Judging from its cash flow, where it must do well or improve its performance to sustain the profit in the future?

• Identify the recent trends in your company’s Cash metrics.

• What does the company share with the public with respect to their cost of capital, hurdle rate, or return on equity?

• Keeping in mind the company’s current cash flow statement, what are its major sources and uses of cash? How do major cost lines like interest payments influence your company’s strategy and current challenges?

• Compare your company’s performance with its strongest competitor’s performance with respect to cash.

• Keeping in mind the company’s current cash situation, which products and services according to you, would give it the maximum advantage?

Profits

It’s important for you to keep a track of how much revenue your company is generating when compared to the effort, time, and expenses that are being invested into the production. The following table will give you an accurate description of your company’s profit.

Fill up this table with the data needed −

(The “Details needed” column will tell you the source of the information)

Based on the information collected above, answer the following questions −

• Are the goods and services provided by your company unique? If so, does it result in a high margin of profit or low? What elements contribute to the profit margins of your company?

• Identify the trends in the Profit metrics.

• What does your company share with the public about its sales, volume, cost management, and economies of scale?

• Identify all major costs and items that impact the profit of your company, after going through the Income Statement. How do they influence the company’s strategy and current challenges?

• Compare your company’s performance with its strongest competitor’s performance with respect to profit.

• Keeping in mind the company’s current cash situation, which products and services, according to you would give it the maximum advantage?

Assets

A strong company will have a considerable investment in assets. Your company’s investment in its assets will tell you what their growth chart is going to be in the next couple of years and the direction they are headed.

Fill up this table with the data needed −

(The “Details needed” column will tell you the source of the information)

Based on the information collected above, answer the following questions −

• From an Assets perspective, what are your company’s key assets? How does your company get the assets it has and how do they compare to the ones needed to run the business successfully? What is the liquidity of the company?

• Explain how the Assets Metrics of your company are related to the current trends in Profit and Cash.

• What does your company share with the public about its strategies around asset management, concentration, out-sourcing, and innovation?

• What are your company’s major line items impacting asset strength and utilization. Go through the company’s balance sheet and understand what its strategy and current challenges are?

• Compare your company’s performance with its strongest competitor company’s performance with respect to assets.

• How will your conversations or pitches about your company differ after this knowledge and what products and services would you like to offer them based on these answers?

Growth

A stagnant company is a lost company. A company should always look to grow in the future as new competitors will always keep arriving at the scene to eat into the proverbial pie. In addition to that, customer preferences will keep changing. Also, a start-up company may cut profits with lesser assets and costs.

Fill up this table with the data needed

(The “Details needed” column will tell you the source of the information)

Based on the information collected above, answer the following questions −

• Is your company growing? Is it taking a market share from other companies dealing with the same products and services? Is it investing in newer markets?

• Explain the risks factors of your company and what external factors like regulation, exchange rates, tariff rates, stock market fluctuations, etc., is the company most susceptible to?

• Identify and explain any trends in the Growth metrics.

• Review the company’s stock price performance over the past five years. Find any context you can to major moves upward or downward in the stock. What made investors buy or sell the stock at that time?

• What do the company’s executives say publicly about their strategies around Growth?

• Consider the same questions with regard to any interim period since the company’s most recent fiscal year end.

• Compare the company’s performance and priorities with respect to Growth with those of one or more key comparison companies.

• Identify your impact – how will the above impact your conversations or pitches with this company? What products or services would you offer them based on these answers?

People

A business always depends on a market that will need or want its products. Without a loyal customer base, no business will manage to sustain its initial success. Therefore, it’s always advisable to study the changing buying patterns and trends of the customer.

The following questions will give you an accurate assessment of your company’s customer acceptance −

• Describe this company generally from a People perspective. Who are its key people? How does it measure success with them, and why does it choose these metrics in particular?

• Identify and relate the people’s trends to Profit, Cash, and Assets.

• What do the company’s executives say publicly about returning capital to shareholders, innovation, reliability, efficiency, regulatory compliance, profitability?

• Compare the company’s performance and priorities with respect its competitor companies.

• How will the information obtained through this analysis impact your conversations or pitches with this company?